England (Commonwealth Union)_ Investment in British manufacturing is poised to dip for the first time in almost two years as firms begin to curtail expenditure as a recession approaches next year. The balance of Make UK members reporting an increase in investment intentions during the previous three months of the year fell to negative 5% from plus 7%. This was the first time the metric has fallen below zero in seven quarters, dating back to the height of the coronavirus epidemic.
The quarterly Make UK/BDO Manufacturing Outlook poll, released on Monday, predicted production would fall 4.4 percent this year, compared to a very strong 2021, and predicted future drops. Make UK’s September prediction still predicted 0.6% growth for the year, and the change in outlook underscored the extent to which circumstances for the industry have worsened dramatically, particularly in the last quarter of the year. It also predicted a 3.2% contraction in 2023 when the UK entered a recession.
The proportion of manufacturers reporting an increase in orders decreased drastically in the fourth quarter, from 15% to 6%, with the figure falling to -2% in the first three months of 2023. The report will put more on the government to find methods to promote corporate investment, with firms throughout the country warning that they would cut down on expenditure if the economy worsens. The reduction also comes as the government’s tax incentives aimed to stimulate company investment the so-called super deduction tax cut are set to expire next April.
The government has been assisting firms with energy bills for six months, but industry leaders have warned that the cliff edge when this assistance ends in March might result in widespread business failures if prices continue high. Meanwhile, with the UK and other countries across the world expected to enter a recession next year, businesses are concerned that demand for their products may plummet as well.
